Investment for 1 to 3 yrs

POSTED BY Amit ON June 25, 2012 10:24 am COMMENTS (11)

I am looking for investment option for 1 to 3 yrs… One option that I know is FD, but the end return is reduced by 2/3 percent because of tax.

Is there any other secured investment option (like FD) where I will get around 8 to 10 % return?

11 replies on this article “Investment for 1 to 3 yrs”

  1. Renu Chauhan says:

    Welcome 🙂

  2. Amit says:

    Thanks Renu. I will check that link.

  3. Renu Chauhan says:

    Hi Amit,

    As SEBI doesnt allow to suggest any FMP as per my knowledge i would request you to keep a tap on the below mentioned AMFI link which has the details of all the latest FMP offers. Just keep in mind that before taking any investment decision read the Scheme information document. Know the Credit Ratings of the paper that the scheme will be investing in(I would personally prefer a credit rating of AAA/A1+, AA).

    http://www.amfiindia.com/nfo.aspx

    I would also like to share that as FMP’s are close ended funds they are open only for a certain time period and hence you will have to keep an active check on them. You may also set a RSS feed for the same so that you are updated about all the latest offer.

    Or you may do it my way i.e. open account with an online mutual fund distributor like fundsupermart.com and ask your investment speciailst to keep sending you information of all latest NFOs – FMPs. 🙂

    Thanks & Regards,
    Renu C

  4. Renu Chauhan says:

    Hi JD,

    I agree with Ashal on this. Please do take this investment option wisely.

    Also would like to ask one question. As you mentioned you would be investing this amount under “Sr. Citizen” scheme, I think you would be 60yrs+. Then why do you want to invest in an option that blocks your money for 2 – 3yrs? wouldnt you require some liquidity on that amount? Please do also check if by any chance you would want to break the FD then what would be the return that would be entiteled to you?

    Consider a situation where your bank is providing 9% for a 1-year term and 10% for a 2-year term deposit. Suppose you open an FD for a term of 2 years, and after 1 year you are in urgent need of cash and decide to break this FD. The bank will not offer you 10% on the deposit you maintained for a year. Instead it will offer you the prevailing rate of interest for a 1-year deposit at the time you opened your fixed deposit account. Since the rate for a 1 year term deposit at the time of booking the FD was 9%, your FD will earn 9% interest on the principal instead of the originally promised 10%. So you potentially lose 1% interest, and also pay a penalty (usually 1%, could be less for some banks) for pre-closure. Your effective return falls to approximately 8% from the initial 10% after taking into consideration the prevailing 1 year rate and penalty.

    So do check on all aspects and decide on your investments. I would personally advice an Income Fund for a period of 2-3 years as it will provide you liquidity as well as good returns (Im not claiming any numbers here). 🙂

    Thanks & Regards,
    Renu

  5. Amit says:

    Thanks a lot Renu. I want to invest some amount for 6 month & some for 1 year.

    Can you please suggest me some good FMP for 6 months, 1 yr & 2 yr?

  6. J.D. says:

    Hi
    I wanted to invest 20,000 in FD for 2 to 3 years…our co-operative bank provide me 11% interest rate for 2 yrs(Sr.citizen)….. shall i invest this Amt in tht Bank ….. Is there any other secured investment option…where I will get around 10 to 11 % return?

    Regards,
    J.D.

    1. Dear JD, the biggest risk in case of a Co-operative bank is the bank itself. If you are confident that your bank is in sound financial health, you may go for that 20K FD.

      Thanks

      Ashal

  7. Renu Chauhan says:

    Hi Amit,

    I agree with Ashal that “return is the function of risk”.

    But i have a slightly different opinion about the choice of fund for investement. As you were eyeing an FD that states that you dont require a monthly income but you are looking for a fund that can provide capital protection and stable returns. Mostly MIP’s are suggested if you are looking for a monthly income. Also MIP’s have a fair exposure to equities as well so if you cant handle even a little bit of volatility i would be scared to offer you this fund.

    Although there is no specific rule book about investment horizon but you may find your answer in the different categories of debt fund available which can match your requirements :

    Ultra short Term plans: Generally used by investors with a horizon of 1 month – 3 months, 6 months max. Best option when compared to savings a/c.

    Short term plans: for a period of 6 months – 1 year

    Income plans: for a period of 15 months – 3 years

    FMP: A product similar to FD. Fixed Maturity Plans (FMPs) are fixed term, closed-ended schemes that invest in fixed income instruments of various durations. They range from 3 months, 6 months, 9 months, 1 year, 2 year and 3 years. One thing you should keep in mind is that FMP cannnot be redeemed before the maturity date (as they are lisated on the stock market and the liquidity fro its redemption is very less or i should say not at all there) but it gives you a tax adbvantage over FDs.

    Once you have selected a category and time horizon we may definitely check the best performing fund in the category and the one with lower credit risk.

    Do let me know the details of your requirement so that we can choose a fund accordingly 🙂

    Warm Regards,
    Renu C

  8. Amit says:

    Thanks…

  9. Dear Amit, the return is the function of risk. Although high risk does not guarantee a high return but it provides you a possibility.

    For the given term of 2-3Y, you may go for HDFC MIP LT plan.

    Thanks

    Ashal

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